In Hegelian terms, it may be that the Bolshevist revolution
of 1917, which established Socialism (or Communism) as a type of society,
was a "thesis" with respect to the relationship between business
and government. Government overwhelmed and obliterated the business community
as the
state assumed ownership and control of the means of production. Government
intrusion in business activities was total. Then
came a time when the opposing ideologies of Socialism and Capitalism
competed for dominance in the world. One aspect of this competition was
military - also known as "the Cold War". Another aspect was ideological;
and still another, economic. After all, Nikita Khrushchev once promised
to "bury" us with our capitalist system. He meant that Socialism
would show its superiority in organizing productive enterprise and out
produce
capitalist societies. It did not turn out that way. The Soviet Union
developed internal problems which, when combined with the need to maintain
an expensive arms race, caused its society to collapse. The socialist
nation itself fell apart in the early 1990s.

Then came a time of "antithesis" in Hegelian terms. The
Socialist challenge had produced vigorous defense of the
capitalist system and a fierce anti-communism. This movement is most
closely associated with Ronald Reagan. Not only did the American president
force his Soviet adversaries to expend more resources than they could
afford on keeping up with America in the arms race, he also began dismantling
government regulations of business dating back to the New Deal. President
Reagan drastically cut taxes, scaled back business regulations, promoted
free trade, and dealt blows to labor unions such as PATCO. Pure capitalism
was on the rise. Right-wing theorists proposed "an end to history". There
was no longer any question that the capitalist system was superior to
socialism. Even nominally communist governments such as China's were
inviting foreign businesses to invest in their countries to hasten economic
development.

Now is a time when capitalist hubris has become exposed.
Perhaps history did not end after all. Perhaps unbridled capitalism has
faults that government regulation might correct. After the Soviet Union
fell, American capitalists missed a big opportunity in Russia by failing
to aid a people in distress. The dismantling of Socialist enterprise
led to a rule of gangsters and oligarchs while the people suffered immensely.
And now we have Vladimir Putin and his protege, not exactly capitalist
zealots. The opening of China to capitalism has meant that American manufacturing
has succumbed to the lure of cheap labor. The world's foremost capitalist
nation no longer has a manufacturing base but is instead spending far
more money than it takes in and is going increasingly into debt.

Yes,
the global economy is a capitalist one, but the hearts and minds of
the world's people are with the anti-globalization movement. Few appreciate
the capitalistic "race to the bottom" in terms of wages and working conditions.
And the crowning
blow is that the U.S. government is asked to come to the rescue of Wall
Street banks which have not the cash they need to meet obligations! Those
bastions of the capitalist system are themselves facing bankruptcy.

So what does this mean? That Lenin was right, after all?
No, it means that neither of the extremes, pure socialism or pure capitalism,
suits the needs of contemporary society. We need, in Hegelian terms,
a "synthesis" of the preceding systems. That means that both government
and business play a role in the economic life of a society. There is
a new relationship between these two institutions. And what might that
be?

I would speculate that the coming role of government is
not to own or manage business but to regulate its activities so that
long-term public ends are served. The new factor today is the collision
between
economic
growth
and the natural environment. Adam Smith’s theory of the free
market did
not anticipate how economic transactions would collide with a fixed supply
of natural resources. Taxation is needed to make certain commodities
artificially expensive when their supply cannot be sustained. We need
government to create the proper financial incentives to guide humanity
in a smooth transition from an era of wasteful plenty to one where population
pressures and industrialization put pressure on the earth's resources.
Otherwise, a crash landing will take place.

Now, more than ever, we need government to regulate
economic affairs for the betterment of society and preservation of
the natural environment. Government needs to take that long view when private
business interests will not, anticipating the needs of future generations.
A good example is the automobile industry. In 2008, Americans were
shocked by having to pay more than $4.00 for a gallon of gasoline.
Part of the inflation in the price of petroleum products had to do
with commodity speculation. However, the expensive gasoline ought also
to have been a warning sign that petroleum is becoming increasingly
hard to find and so long-term price trends will be unfavorable. We
also know that if India and China aspire to transportation systems
like
ours,
the earth will simply not furnish the fuel we will need. So government
must take the lead on this problem. Either we "drill, baby, drill"
and postpone the day of resource reckoning or, with government assistance,
we convert from a transportation system based on fossil fuels to an
electricity-based system based on renewable sources of energy such
as wind and solar power. Business alone cannot or will not undertake
such a transformation of economic arrangements.

Let's get specific. What
is the main political issue that Americans face today? I would
say its
our economic future. Will todays children and grandchildren
enjoy anything near the material comfort which we ourselves have? If
not, what can we do to reverse or mitigate the process of deteriorating
economic conditions?

The looming economic crisis has two aspects:

First, the U.S. economy has lost its competitiveness in
the global market. Our merchandise trade deficit runs over $700 billion
a year - and this after the U.S. dollar has depreciated significantly against
the Euro, the Chinese renminbi, the Japanese yen, and other foreign currencies.
That means that foreign workers, not Americans, hold the jobs that support
the production of goods for our own market. It also means that foreigners
are accumulating dollars and buying up our Treasury bonds, stocks, and other
assets. Besides remaining uncompetitive in merchandise trade, we will
be paying dividends and interest to those foreign investors - income which
the U.S. government cannot tax.

The second and more serious problem is the conflict between
the material wants and needs of the earths growing population
and the material resources available on earth. We are entering the
period of peak
oil, when more oil will be pumped out of the earth than at any other
time before or after. New oil reserves are becoming harder to tap.
If supplies
cannot meet demand now, the imbalance will only become worse in the future.
The growing emissions of carbon gases produced by the internal-combustion
engine
and other devices has raised the earths temperature to the point that
polar ice caps are melting, the seas are rising, and destructive hurricanes,
floods, and tornados become more frequent.

The scarcity of oil may be the least of our problems.
We may also be facing a crisis in food production. As corn is diverted
to ethanol production, supplies drop and prices rise. Single-crop cultivation
has reduced productivity of the soil. Farm land competes with suburban
and exurban development. Limited water supplies are likewise diverted
to urban use. The water level in aquifers around the world has dropped
significantly. Then there is the problem of waste disposal. There
is the problem of air quality when industrial gases are released into the
atmosphere. The list of problems goes on and on. The earths
population, which stood at 6 billion persons in 1999, numbers 6.7 billion
persons today and is expected to reach 7 billion persons by 2012. The
collision between growing population and the earths finite resources
poses a severe threat to our comfort and stability in future years.

Books can be and have been written on each of these problems.
Lets not waste time on restating problems. What are the solutions? For
population growth I have no answer. If were not prepared to adopt
a one-child policy like Chinas, gains in population may be inevitable.
Environmentally conscious persons and groups have proposed solutions to
resource
shortages of various kinds. There is no shortage of good ideas. The
problem is one of political will.

How to reduce oil imports

Lets take the easy part first: the trade deficit.
By and large, the deficit has two components. Around $300 billion of
the $700 billion trade deficit is due to oil imports. We use most of this
oil
in the form of gasoline to power automobiles. If we could find other
ways to transport people conveniently, it would reduce the demand for oil
products. We could expand public transportation, encourage carpooling
and bicycle transportation, or develop new technologies such as smart jitneys
or personal rapid transit (PRT) which would reduce dependence on single-passenger
cars. The federal government could require car manufacturers to improve
fuel efficiency in their products. We could stagger work hours to
reduce traffic congestion in urban areas.

Another option would be to develop cars that ran on fuel
other than gasoline. Ethanol, produced from corn, was the first product
out of the gate. However, we have come to realize that ethanol production
uses more energy than it saves. Ethanol depletes scarce ground water;
it takes four to five gallons of water to produce a gallon of this fuel. Finally,
we need all the corn we can get as food. That does not mean that ethanol
should not be produced from other materials. Brazil has become self-sufficient
in energy by producing ethanol fuel from sugar cane.

In the United States, ethanol producers have their eye
on wheat straw, wood chips, switch grass, and other farm wastes. Royal
Dutch Shell has recently signed a contract with a Madison, Wisconsin,
firm
to produce ethanol from switch grass and sugar-cane pulp. With increasing
sugar imports from Mexico, sugar beet producers in northwestern Minnesota
want the federal government to buy all the sugar beets they cannot sell and
sell this at a loss to ethanol producers.

Increasingly, automobile manufacturers are adapting their
products to use of the new fuels. Sales of flex-fuel vehicles, which
can run on either ethanol or gasoline, have risen from 2.9% of total cars
sales in 2005 to 5.3% of sales in 2008. Sales of hybrid cars, alternatively
powered by electricity and gasoline, have risen from 1.5% of total sales in
2005 to 3.6% of sales in 2008. The momentum is with the hybrids.
Toyota expects to sell one million of its popular hybrid model, the Prius,
each year in the early 2010s. Farther down the line, the auto manufacturers
envision even greater sales of hybrids. Battery-powered electric cars and
cars powered by hydrogen fuel cells will be added to the mix of products.
T. Boone Pickens thinks cars should be powered with natural gas.

But lets concentrate on electricity as a source of
power. Electricity stored in batteries can take the car a certain distance
before the battery needs to be recharged. Its generally less than
the distance that can be traveled on a tank of gasoline. The hybrid
car overcomes that disadvantage by providing a gasoline-powered motor along
with the electric one. Electricity can also be used to break molecules
of water into atoms of hydrogen and oxygen. The hydrogen is captured
separately, stored, and later burned. The burning process creates energy
to power the vehicle. Pure, clean water is the exhaust. In either
case, such cars do not emit greenhouse gases. Their widespread use would
slow the process of global warming.

There are two important questions when considering electric
power. First, how would the power be generated? Second, how would
electric power be transported to its point of use? Electricity can be
generated in conventional power plants that burn coal or gas and thus contribute
to global warming. It can also be generated in nuclear plants that do
not discharge such wastes into the atmosphere but leave a toxic residue of
spent fuel having a long half life. It can be generated also in hydroelectric
dams that change the landscape, in geothermal generators, and in photovoltaic
cells that turn sunlight into electricity. From my point of view, one
of the most promising sources is wind energy. Wind is free and renewable.
Its capture leaves no detrimental effect on the environment. A disadvantage
is that this power source varies with weather conditions. For small-scale
producers, the equipment can be expensive.

My 90-year-old uncle owns a farm in Putnam County, Indiana.
He told me recently that, with the help of engineers from Purdue, he was having
a wind turbine and tower installed on his land. I believe that
many small-scale farmers in Minnesota have the same attitude. And,
thats part of the appeal. Americans
are both patriotic and adventurous. Most sense the danger of our nations
dependence on imported oil. They want to help out in some way.
The potential exists for a vast mobilization of energy
producers on Americas farms.

While the American people are willing, our government has
badly fumbled the ball. Congress failed to renew the tax credits for
wind-generated and solar energy in the 2007 Energy Bill, but, at the Bush
Administrations urging, it did renew the credits for oil and gas.
As it was, the federal tax credit of two cents per kilowatt hour for wind-generated
electricity could only be taken against taxes on passive income - that is,
on income earned by investors rather than by people who work for a living.
Only relatively affluent persons would be given this incentive. Finally,
to make it worthwhile to install wind turbines, one needs permission from
a federal agency to connect with existing power lines. The review process
normally takes two years. Since this agency (Midwest ISO) processes
applications in sequence before starting the next one, it could theoretically
take 612 years to complete the backlog of 306 pending cases.

As a result of government fumbling, the United States lags
behind other industrialized nations in developing wind and solar energy and
related technologies. Germany has increased its generation of wind power
by 70 percent each year for the past decade; solar energy increased annually
by 70 percent each year between 1999 and 2005. In 1997, the United States
produced about 40 percent of electricity generated by solar energy; by 2007,
our share of world production was down to 8 percent. Remarkably, the
state of Israel has committed itself to creating the infrastructure for a
national network of recharging stations for electric cars. There will
be half a million such stations by 2011. Renault and Nissan have joined
in a partnership to provide the equipment.

The state of Minnesota has moved the process forward with
legislation that requires the dominant energy company, Xcel Energy, to provide
25 percent of its electricity through renewable-energy sources by 2025.
The legislation requires the power companies to offer a special tariff to
community producers that would give them more revenue up front in the early
years. Another proposal would have Xcel Energy buy its electricity from
small, locally owned producers at a price that covers costs and provides a
reasonable rate of return. This approach, called feed-in tariffs
has allowed Germany to become a world leader in solar and wind technologies.

Much more can be done, especially at the federal level.
Minnesota Congressman Tim Walz has proposed a bill that would allow up to
$40,000 in tax credits for wind-power generation. The credits could
be taken against any income, not just passive investment income. I would
go further. I would pour massive subsidies into research and offer small
tax credits to people who buy hybrid cars. Repeal the tax deduction
for businesses that buy SUV's and small trucks. If we really wanted to stick
our political necks out, we could raise the federal gas tax.

John McCains and Hillary Clintons proposal
to suspend the federal gas tax in the months preceding the election
to offset
the price increase illustrates the politics of this issue. In Clintons
case, at least, the suggestion was made for reasons of political style.
She wanted to align herself with working class voters who feel
the pinch of rising fuel prices rather than elitists who, as Jimmy Carter
once did, would worry about long-term energy shortages and feel malaise.
This illustrated the politicians willingness to play games
with our energy future.

A major obstacle to increased production of electricity
is power transmission or transportation. It takes seven years or more
to build a new power line. Because the line crosses private property,
there are issues related to property rights and personal safety. With
hundreds or thousands of small power producers, it would be a challenge to
connect them all to the power grid. Therefore, we must begin to think of other ways to get the
power to the end user. If the end use is in automobiles, then the power
might be stored in batteries, which could then be transported. Alternatively,
this power might to used to break the water molecule into atoms of hydrogen
and oxygen. The hydrogen could then be stored and transported to automobiles
equipped to burn it as a fuel.

Xcel Energys CEO, Dick Kelly, has said: Energy
storage is key to expanding the use of renewable energy. Lets
accept, then, that a major effort should be made to improve battery technology.
A University of Minnesota professor in chemical engineering, Bill Smyrl, has
been experimenting with large sodium-sulfur batteries that were developed
in Japan. These batteries are 90 percent efficient - compared with 42
percent for producing and storing hydrogen - and they involve nontoxic materials.
A problem is that each battery is the size of two semi trailer trucks.
For electric cars, we would need to get the power to the cars or to recharging
stations. The big car companies say theyre ready to build electric
cars but are waiting for the needed battery technology to become available.

What to do about outsourced jobs

If oil imports are a major cause of the deficit, another
major cause would be the outsourcing of production to foreign countries, especially
those where labor can be purchased at a low cost. Opposition to NAFTA
in the United States focused on the fact that Americas production workers
would have to compete with their Mexican counterparts who were paid $4.00
a day. There is a similar concern now in having to compete with workers
in south China who were paid $.30 or $.40 an hour, though wages may have risen
lately. Living in a high-cost society, Americans simply cannot accept
wages that low. They therefore cannot compete against the low-wage workers
in other countries if cost becomes the main factor in competition.

Proponents of free trade use various counter-arguments.
They state dogmatically that the world economy is always better off with increased
trade; a 19th century economist named David Ricardo proved that. The
winners who gain low prices at Wal-Mart outnumber the production
workers who lost their jobs. The solution, say economists, is to accept
free trade but expand the safety net for the losers. Send
them back to school to retrain for the postindustrial economy. We must
invest in education, especially in math and science, to prepare the next generation
of Americans to be competitive in the global economy. Presumably these
technologically prepared graduates will go out and invent something that foreigners
want to buy - and, of course, no one will try to copy their better ideas and
forget to pay royalties!!

Our annual trade deficit with the Peoples Republic
of China stood at $232 billion in 2006. This was not because Chinese
business leaders were more skillful than their American counterparts in providing
products for the consumer market but because American business interests decided
to relocate their own production to China in order to cut out the high-priced
American labor. Retailers such as Wal-Mart drove such a hard bargain
with respect to price that relocation to low-wage areas became necessary for
suppliers to meet the contract terms.

The leaders of the U.S. government, who should have looked
out after the interest of American workers and imposed protective tariffs,
but failed to do so because of the free trade agreements in effect.
Then, customarily, they accused the Chinese government of cheating.
The Chinese were keeping the value of their currency pegged to the dollar.
But, if people think currency adjustments will solve the problem, they will
be disappointed. Professor Bezhad Yaghmaian points out that, if the
Chinese price becomes too high with the strengthened renminbi, America will
have to purchase goods formerly obtained from China from some other country
because our own manufacturing capacity with respect to certain products no
longer exists. The deficit will remain.

When I campaigned in Louisianas 2004 Democratic presidential
primary, I attended a conference in Natchitoches on revitalizing rural Louisiana.
A representative of the Weyerhaeuser Company - one of many that got its start
in Minnesota - told a group of attendees that if Louisiana became known as
a low-cost place to do business, business would beat a path to that state.
I think he was right. Cost does largely determine where companies will
build production facilities. The problem with the United States is that
we are a high-cost place to do business. Our own companies are therefore
closing down plants in this country and opening up ones in low-cost areas
abroad.

What concerns me is the cost of labor. We have a
relatively educated work force, but the world needs cheap labor for manufacturing
and agriculture. Our educated people are too expensive for those tasks.
With an average student-loan debt of $23,375 - fifth highest in the nation
- the graduates of Minnesotas colleges and universities need to pay
back the banks and credit-card companies as well as secure housing and other
necessities in life. It takes an estimated annual income of $32,000
to handle the debt payments comfortably; and not everyone can find such a
job.

So the idea that Americas college graduates are well
prepared to compete in the world economy is hot air as far as Im concerned.
It turns my stomach that the same educators who are fetching high salaries
in institutions with soaring tuitions are also cheerleaders for free trade,
putting their grads in direct cost competition with the lower-priced grads
of Asia and other places. And they are all high-minded people
with a strong ethical bent!!

I am led to the conclusion that, by and large, the next
generation of American workers - with some exceptions, of course - cannot
compete in the global economy because their labor costs too much. It has to
cost a lot because Americans live in a high-cost society. So what do
we do? I think the only answer is to shield American workers to some
degree from direct cost competition with workers in low-wage countries.
That could be accomplished by placing tariffs on goods manufactured in those
countries which are imported into the United States. The savings in
labor costs achieved by outsourcing could be partially offset the additional
money needing to be paid when the products come here to be sold. We
need to buy some time until costs and living standards abroad catch up to
ours.

We also need to be thinking of how we can get our own cost
structure more in line with the rest of the world. Our productive economy
is weighted with barnacles that have attached themselves to its
wealth. Some of the worst are government (the military-industrial complex),
the health-care system, financial institutions, our expensive education, and
the legal system. There are many sacred cows needing to
be culled. Attractive-looking men and women in suits - professionals
all - will be on hand to defend the expensive practices. The word quality
will often be heard.

Now, of course, with respect to tariffs, the U.S. government
is obligated not to impose them unilaterally under quasi-treaties (never ratified
by the Senate) such as NAFTA and the World Trade Organization (WTO).
Yet, there are procedures for getting out of these obligations. I am
not for Bush-style unilateralism. We need to hold discussions with other
nations that are our trading partners and say something like this: The
United States cannot afford to be the worlds economic patsy much longer.
We cannot continue to run up huge trade deficits every year. We want
to meet our financial obligations, but to do so we need a balanced trading
system, not an exchange of goods for debt. Free trade is not working
for us. So lets replace that type of trading system with a new
one that allows poor nations to develop without collapsing the economies of
once rich nations. We need, in other words, a development model
of trade.

If such discussions are held, they might lead to a new
consensus in which nation states are allowed to impose tariffs on imported
goods to achieve certain development objectives. Here is where one begins
to envision a better world, not just for Americans but for all
people on earth. I think political leaders in all countries can agree
that people everywhere need a certain material standard of living; and that
to become entitled to use of the earths resources, they need to be employed
in a productive enterprise. And, if the free market does not afford
full employment in enterprises of that type, government needs to achieve that
result through regulation. A cornerstone of the regulation would be
incentives for business to reduce hours of work. With an artificial
reduction of work time, supply and demand can achieve a satisfactory result
with respect to wages and employment levels.

Admittedly, were getting into the realm of social
engineering. Were having government planners decide what
is an appropriate level of development - i.e., level of wages and working
hours - in particular countries and build trade policy around this. Obviously,
workers in rural Africa or China cannot expect the same economic reward as
workers in Manhattan; but they can expect that someone will be looking out
after their interests and hopefully their situation will improve. Trade negotiators
will then discuss what level of trade protection is acceptable in which situation.
Eventually, a global consensus may emerge which permits national governments
to impose tariffs in particular ways without fear of retaliation. Those
tariffs would be a way that national governments can regulate international
business. Social objectives will once again be pursued.

How would this work? I have proposed a system of
employer-specific tariffs on goods imported from low-wage countries
that enter the U.S. market. The tariff rate would take into account
the cost differential between production costs in the foreign factory and
comparable costs in the United States. I would not seek to recover the
entire cost differential through tariffs. Neither would I calculate
the U.S. cost on the basis of actual costs where high-priced union
labor is involved. But it is justifiable to set a standard for a reasonable
wage in the United States and use tariffs to bring the cost of imported goods
closer to what the goods would have cost if produced here under those conditions.

While protecting U.S. workers to a certain degree, such
a system of tariffs would also encourage business to improve its offering
to foreign workers. If the sweatshop workers receive higher wages or
enjoy shorter working hours, then labor costs increase and the tariff rate
adjusts automatically. The higher those costs, the lower the tariff;
and vice versa. So the U.S. government could actually become a powerful
influence on wage levels and working conditions in foreign countries.

This is a better arrangement than at present where union
organizers are sometimes murdered by business interests in collusion with
foreign-government officials or where business promptly closes down factories
that are successfully organized and moves its operations elsewhere.
If, for instance, factories in coastal China are organized and wage levels
rise, employers move to the poor interior of China, or to Vietnam, or another
place in an earlier phase of industrialization where the process begins over
again.

Sometimes when I have advanced this concept, critics have
complained that it would entail new government bureaucracies and endless paperwork.
What if the foreign producers lie about their wages and hours? These
are all valid concerns, but not insurmountable. Most large multinationals
already audit labor standards in their foreign subsidiaries and contract partners.
Computers make it possible today to store vast amount of information and make
speedy calculations. Bar-coding and similar technologies make it possible
to identify products entering the United States, determine a tariff status,
and, with computers, make calculations on the spot. I would suggest
that the time may have come for such techniques to be employed in global trade
even if they might previously have been impractical.

A word about health-care costs

Let me say a word now about lowering the cost structure
of U.S. production. The most significant cost might be for employee
health
insurance. Decoupling health care from employment would seem to solve
the problem, but really not. Costs are merely shifted to individual
workers who will need higher wages just to stay even. The current
emphasis on universal health-care coverage is unappealing because it represents
throwing more money at a broken system. We need to lower the cost of
health care, not just find ways that the exploding costs can be shifted
to
healthy people from people receiving the services. Costs must be lowered.
Thats the bottom line.

An immediate step in the right direction would be to repeal
the prescription-drug benefit under Medicare. I
dont
trust the relationship between doctors and the drug companies. To
place more pills in people does not make for a healthier population.
Government needs to put its money into illness prevention rather than drugs
and other expensive treatments. The prescription-drug benefit carries
an estimated unfunded liability of $17 trillion. It was another dubious
gift to the American people from friendly lobbyists and the Bush
administration. Away with this! We cant afford the program.

The next thing I would do is propose free universal health
courtesy of the federal government. Every U.S. resident should be entitled
to receive three things without charge: (1) an annual physical to monitor
general health conditions, (2) a once-in-a-lifetime genetic analysis focused
on susceptibility to disease, and (3) access to a web site in which ones
own health information is stored, which also answers basic health questions.
The whole thing, I figure, should cost less than $100 billion a year.
It would be a bargain, especially for Americas uninsured. The
present medical system would, of course, continue. The free government
service would be a supplemental program rather than a replacement for medicine
as it is practiced expensively today.

Now we need to discuss the environmental crisis facing
people today. This is not an American problem but a problem both
for ourselves and the rest of humanity. The earth lacks the resources
to support a growing population, especially one which expects increasing living
standards measured in access to material resources. Chinas
1.3 billion people would soon exhaust the earths resources if
per capita they consumed the food, energy, water, and other materials
that
Americans
consume. So we must do more with less. We must lower our material
expectations.

Books have been written on how to leave a lighter footprint
on the earth. We can recycle waste products, drink tap water instead
of water in plastic bottles, ride bicycles to work, and do other environmentally
responsible things. The bottom line, however, is that we are giving
up something. We are sacrificing our usual comforts and pleasures
to save the earth. while this is necessary and good, but it may
not be enough to satisfy the selfish creatures that we are. We
want to experience progress. We need to move forward to a better future. Is
that possible in an era of shrinking resources?

Yes, I think it is possible. In certain respects, our species
has opportunities to enjoy life that did not exist in earlier times.
I think we should make the most of them. We can move forward to seize
those opportunities. Let me briefly mention and discuss two possibilities:

(1) shorter work time, and
(2) the substitution of communication for transportation.

Shorter Work Time

Often when trade protection is discussed, critics argue
that more jobs are being destroyed by improvements in productivity than
by
outsourcing to foreign countries. Columnist David Brooks points out,
for instance, that U.S. steel producers have reduced the number of hours
it
takes to produce a ton of steel by 90 percent in the past thirty years.
He concludes from this - wrongly, I think - that labor and resources are
flowing into other industries, such as those in the service sector, that
improve life in other ways. Its like advancing from the horse-and-buggy
age into the age of automobiles a century ago, he says.

Throughout the 19th century, when industrial efficiency
was likewise improving, working people through their unions agitated for reductions
in work time out of fear that machines would reduce the need for human labor.
That approach was sound. As labor productivity improved and hours
were reduced, employment levels remained stable. Workers eventually
won the eight-hour day, and then the five-day week. The reduced hours
did not prevent incomes from rising. Working people thereby gained the
means to enjoy life in their increased leisure time.

Thus the consumer mass market was born. One of its
chief architects, Henry Ford, explained it succinctly. He said:
The people who consume the bulk of goods are the (same) people who make
them .. That is a fact we must never forget - that is the secret of our prosperity.

Ford had an ecological view of the economy: Working
people built products and were paid for their work. They used that money
to buy consumer products. Employers needed to pay people to sell their
products and make a profit. If both parts of the cycle were maintained
in full force, the economy flourished. Thats the philosophy that
guided certain enlightened business leaders and organized labor as the U.S.
consumer market was formed.

Economists of a mechanical mind see it otherwise.
For them, there is a productivity dividend which can be spent in either of
two ways. Either workers receive leisure or they receive increased income
to buy consumer products. If the employer has insufficient profits,
he cuts wages, lays off workers, or invests in labor-saving equipment that
allows production to take place with fewer workers needing to be paid.
Even if the consumer market is anemic, it will take some time before this
becomes a problem.

In the late 1950s, the question came up what to do about
automation. The Senate appointed a special committee headed
by Senator Eugene McCarthy of Minnesota to study the question. The choice
was whether to combat the threat of unemployment by recommending reduced work
hours or take less far-reaching measures such as extended unemployment benefits,
more job retraining, and increased public works. The committee went for the
second approach. However, McCarthy himself had lingering doubts.
In later years, he was a tireless proponent of shorter work time.

At the time of decision a half century ago, it was thought
that organized labor was supporting shorter work hours, business was opposed,
and government was neutral. In reality, the unions were not pushing
so hard to cut hours because their members were becoming addicted to overtime
pay. The time-and-a-half pay provision in the Fair Labor Standards Act
was a perverse incentive to seek and accept work beyond 40 hours as much as
it was a disincentive for employers.

More telling, the federal government was far from neutral
on this question. The Treasury Department wanted Americans to work long
hours because that would increase taxable income. Also, in the heat
of the Cold War, our nations leaders wanted to keep Americans working
and producing goods including military hardware. Lyndon Johnson once
said: Candor and frankness compel me to tell you that, in my opinion,
the forty-hour week will not produce missiles.

That was then, and now is now. Fifty years ago, we
took the fork in the road that led to increased production of goods and services
and rejected the fork that led to more leisure. And most economists
applauded that choice. They said, in effect: Look at the growth
in GNP that we have enjoyed since that time. The United States would
be a relatively poor nation if we had chosen to take it easy.

That sounds nice until you start to analyze GNP.
Then the economists would have to say something like this: Look at
all the wars we have been able to carry out since the 1950s because American
workers
were willing to sacrifice their free time. Were a greater nation
because of it. I would say in response: I wish we had never fought
those wars.
They do me and my loved ones no good at all. If we had never produced
the wealth that went into those wars, our nation would be better off today.
The American people could have put their time to better use. Government bureaucrats
should not be deciding such things.

In a 1989 book, Nonfinancial Economics,Eugene McCarthy
and I made that kind of argument.
We identified the growth areas in the economy and concluded that many could
be classified as one or another form of economic waste.
People would be better off if that type of product had never been
built.
Living standards did not increase in a real sense because Americans were
kept chained to their office chair or work bench doing unproductive work. Such
"output" would not have missed had it never been produced.

The example of war (or the war on drugs or the war on
terror) gives an example of what we were talking about: The country
goes to war to defeat an enemy. But what if we never made enemies
in the first place? Wouldnt that be better? We spend huge
sums of money on health care. But what if we did not become sick? If
there were simple, inexpensive ways to remain healthy, then wed
be just as well off if we saw less of the doctor and did not take any
of his prescribed medications. The
criminal-justice system is a major expense for society. But suppose
young people found good jobs and did not become criminals? If
we laid off policemen, prosecutors, judges, and corrections officials
because of declining crime
rates, we would never miss their GNP-boosting service.

The list of potentially wasteful expenditures
goes on and on: our national gambling habit, excessive litigation, unwanted
products promoted by advertising, expanded credit-card debt, prolonged education
to qualify for any kind of job, the obligatory purchases for Christmas
and
other commercial holidays. This is what were getting with our increased
GNP. The American people are not better off having such things.
Most can, at best, be called necessary evils. The better
strategy, socially if not financially, is to prevent evil on the front end.

I will go out on a limb and predict that if the government
made a move to enforce shorter work time, the economy would contract
financially
but people would be just as prosperous. We would not miss the waste
we had been required to produce. Maybe peace would break out in the world.
Maybe the underclass would find jobs while the educational gatekeepers who
screened people for employment would have to redefine their mission.

Standards might be lower in such an environment
but people would be happier. Freedom, if not "excellence", would
break out in a real sense. We would soon discover that individuals could
make
better
use
of their time
when they are free to spend it themselves rather than when someone else directs
it. You can bet that few Americans would decide that they wanted
to invade Iraq.

How, then, do we implement shorter working hours?
The basic mechanism is provided in the Fair Labor Standards Act. Congress
could amend this act in any of several ways to increase the financial incentives
for employers to shorten their schedules of work:

(1) It would lower the standard workweek from 40 hours
to 32 hours or some lower number.

(2) It would raise the overtime penalty rate from time-and-a-half
to a higher multiple.

(3) It could tighten or eliminate the exemption for
managerial and professional employees.

(4) It could provide that the overtime premium be taxed
away instead of being paid to the employee.

Additionally, the Congress could pass legislation for
a minimum vacation, such as what is currently under consideration.

The reality is that if Congress did enact substantial legislation
to reduce work time, businesses would complain loudly. Some employers would
move their operation to foreign countries. Thats why we need to
link the proposal for shorter hours to changes in the trading system.
What we need, in my opinion, is shorter workweeks everywhere on the planet.
We need nation states agreeing to pursue that objective for the sake of full
and better employment and protection of the environment. We need nations
allowing each other to impose tariffs on imported goods produced in substandard
working conditions.

Then, whether or not it considers shorter work time indicative
of a bad business climate, the multinational corporations will find
the same
climate everywhere they might potentially locate production. But, in
fact, as Henry Ford realized, reduced work hours make for a better business
climate. It is only the CEOS or financial types who want to take the
removable wealth out of a business and give it to themselves who would suffer.

In conclusion, then, the prospect of shorter work time
enabled by advanced production technology is one of the better possibilities
that we can envision for the future. The possibility of working only
three or four days a week in ones years
of vigor and health without suffering material deprivation would bring a
dramatic improvement in peoples lives. Individuals could pursue their
true interests in full force, whether it be gardening, painting, writing
poetry, taking children
to the zoo, or just playing with the dog.

Substitution of Communication for
Transportation

We are living in a time when petroleum is becoming expensive
and conventional transportation is more difficult. At the same time,
communication technologies are rapidly developing in capacity and speed.
Their cost is coming down. This is a happy conjunction of circumstances
when a problem and its solution arise at the same time. As transportation
shrinks with higher expense, cheap communication expands. And the one
is a more limited form of the other, conveying an image of sight or sound,
or an image of words, rather than transporting physical substances.

That may be enough. We travel to a distant place
for the sake of communicating with someone; or we travel to experience
a particular
scene - the Taj Mahal or Eiffel Tower, for instance. In other words,
it is primarily for the sake of the image - for the visual experience
- that we travel to a place.
The image could be acquired as completely, and much more cheaply, by telecommunication
devices or by the Internet as through personal transportation. It
may cost $1,000 to fly to China but only $.30 to speak to someone in China
for
ten minutes on the telephone. That ten-minute conversation may be the
purpose of our visit. So why travel when a phone conversation will
do?
We can accomplish more with communication given our limited time
and money.

Computer and wireless technologies make possible instantaneous
communication wherever one might be. The visual image of a person may appear
on a computer screen as he speaks through many miles of fiber-optic cable.
If the screen is large enough and has good resolution, it may seem that the
person is physically present. With videoconferencing, it becomes possible
to convene meetings quickly among individuals who are physically distant.
With personal computers, it becomes possible to work at home instead of commuting
to an office.

In the future, such arrangements may become more common.
We need not worry so much about running out of oil if electronic communication
is plentiful and cheap. The same experience once had through expensive travel
becomes available to the common man or woman for a few pennies. Thats
why I say that, in some respects, life may improve despite resource shortages
in the future.

A consequence of this revolution in communication devices
following one in transportation is that the average person can participate
in a global community. Messages sent on the Internet are picked up by
persons all over the world. The trend will surely increase as communication
devices further improve.

As I write this sentence, my wife is traveling in the
Chinese province of Sinkiang along the old Silk Road. My daughter
will soon be arriving in Paris, France. Transportation on a United
Airlines flight has made this possible. In the future, I would
imagine that computer links between distant places would let someone
experience
to some degree what
they are experiencing in the flesh. I could sit before my computer
screen and see live images transmitted from such places. I would be
there myself for all intents and purposes; but the cost would be minimal.

Carrying this idea further, I can anticipate that computer
technology will soon advance to the point that I can speak English to
a Frenchman
in Paris or to a Uighur in Sinkiang and from the other end will emerge a
perfect voice translation in French or in the Uighur language which the
other
can understand.
We can carry on a conversation as if we were neighbors. If I become
bored with events near the Silk Road, I can quickly switch sites to acquire
the images of street life in Rio de Janeiro or of a village at the foot of
a mountain in Austria. Again, there would be no problem in communicating
with people whose speech I do not understand. The computer would do the
translation.
The Tower of Babel would be no more.

So in the future age which I can imagine, humanity will
have both more free time and more opportunity to communicate with others around
the earth. This is a prescription for a new world culture. We
can take cheap, quick tours of museums around the world. We can listen
to any kind of music we want. We can experience the earths unusual sights.
What only the wealthy could hope to see in the 19th century will be commonplace
in our century for persons of average means.

In other words, exposure to world culture will not be limited
to an educated elite. This will be immediately accessible and affordable
to anyone who wants the experience. The masses of people in different
parts of the world will get to know each other. And, not only will we be able
to travel around the earth vicariously, we may also be connected
with scenes from outer space. It will be a fabulous future!

New Ways to Confer Rank and Position

I would anticipate a change in civilizations in the near
future. With respect to the economy, the capitalist system may need
to change. The problem is that we cannot allow economic growth
(in terms of the use of physical resources) to continue indefinitely when
the earth has a finite supply of those resources. If the earths
people are all to live in reasonable comfort, we must share. We must
envision a more even and equitable consumption of needed materials instead
allowing elites empowered with money to consume a disproportionately large
share.

Some say that inequality of wealth drives capitalism, providing
an incentive to take risks and innovate. To a certain extent, that situation
should continue. However, humanity as a whole has a stake in conserving
material resources. It cannot permit a system to continue that recklessly
wastes resources - in other words, uses them for reasons of personal vanity
or exhibiting of status rather than to serve a humanly useful need.

Thats the problem. We are not prudent in our
use of material resources - petroleum, water, air, food, wood, metals, topsoil,
and so on - but are into that conspicuous consumption that is
intended to exhibit status. Social status is what we truly want, not
the comfort and pleasure that comes with consumption. So be it then.
Let human beings pursue status. Let them compete for rank and position.
Let them, however, compete by other means than becoming rich. That may
be the key to our future salvation - combining the freedom to compete for
social rank with the necessity to distribute materials among the earths
people according to a rational plan.

Therefore, our dismal future that features
economic regulation and a leveling of wealth need not lead to despair.
It is brightened by the freedom that comes with more personal free time.
We ourselves can invent what to do. Is that so much worse than being
bound by long work hours, conformity of thought, and the need to service increasing
levels of debt? I think not. We need to stop being brainwashed
by the idea that we are privileged because we are plugged into
the economic system when, in fact, we exhibit many characteristics of a slave.
Lets embrace true freedom. Let the bold and clear-sighted ones among
us grasp the opportunities at hand.

I think the seeds of this more sustainable future are already
sown. Think of all the educated persons among us, from good middle-class or
upper-middle-class families, who have cultivated interests in culture or the
arts. They may do painting, or sculpting, or write poetry. Some
others may be into physical fitness, or they may embrace the latest fashions
and personally look good. Another type of person may be a jokester, perhaps
even a stand-up comedian. Then there are those who aspire to play in
rock n roll bands that could possibly become famous. We all have
something that we cultivate personally around which our talents are focused.
Such pursuits provide the basis of the recognition and praise that we crave
without expending excessive natural resources. Let social status be
erected on such a foundation rather than on the successful pursuit of resource-consuming
wealth.

What it takes now is a more organized system of conferring
rank. We can begin, perhaps, by deconstructing the previous system.
Instead of competing for a limited number of good jobs, let many
more people share those jobs. Maybe high-level employment can be like
service in the military - sign up for a three-year stint and then let someone
else take over. Being a CEO would not seem to important
if terms of service were limited and incomes were more tightly controlled.
Many different people would get a shot at this experience. Then, having
given to society
in a productive capacity, persons retired from the job could move on to pursue
personal interests. Contests and other structured systems of competition
could establish rank in those areas as well.

Ultimately, I think, individuals are seeking a clearer
and better sense of their own identity. The definition of personal identity
is a life-long quest that motivates people regardless of circumstances.
Who we are depends partly on our group affiliations - our race, religion,
ethnicity, gender, and occupational class, among others - and partly on our
individual interests and pursuits. I would say that we each are free
to pick an identity that suits us - makes us look good. If the general
history is being used to make us look bad, then declare that we want no part
of this history. We are each free to pick our own stories that imply
a role for us personally. We affiliate with others who pick the same story.

In conclusion, I foresee, as belonging to our more hopeful
future, not totalitarian socialist government and not laissez-faire capitalism
but a system in which government regulates business costs
to adjust decisions of the free market. It may artificially tax resources
that
will become
scarce in the future. It may impose tariffs on goods imported from low-wage
countries to preserve the semblance of balanced trade. It may force businesses
that hire illegal immigrants to bear part of their social cost up front
in the form of a tax surcharge as wages are paid. In any event, the general
U.S. taxpayer cannot continue to bear the brunt of government's bountiful
subsidy for businesses hiring lobbyists. A new and more honest relationship
between business and government needs to be established. And increased
personal freedom would be the end.

It appears that the politicians - of both parties - are
a major stumbling block to progress. The
jury is still out as to whether or not the political class in America
is up to being part of a solution rather than remaining part of the problem. Let's
just say that we must have faith in government's ability to rise to the
occasion since our future depends on it.